Pound gains on King remarks

Story link: Pound gains on King remarks

The pound strengthened versus the US dollar Thursday on remarks from Bank of England governor Mervyn King, who said that the Bank will do whatever is necessary to cut inflation in the UK.

Mr. King also said that the Bank believes that UK inflation will be above 4 percent before the end of 2008.

At 12:30 p.m. in New York, it took $1.9866 to buy a pound while the UK currency traded at 79.20p to the euro.

Despite Mr. King’s comments, however, traders were less convinced that the Bank will raise interest rates anytime soon due to slowing economic growth.

The US dollar, meanwhile, weakened in relation to the euro and the yen on reduced expectations that the Federal Reserve will hike interest rates soon.

The greenback traded at $1.5734 to the euro in early afternoon trade in New York, while it took ¥107.2050 to buy a dollar.

The Australian and New Zealand dollars both saw gains again after yesterday’s decision by the US Federal Reserve to hold interest rates at 2 percent, maintaining those two currencies’ advantage as favorite currencies for investors to purchase in carry trades.

Australia’s current rate is 7.25 percent, while the main rate in New Zealand is 8.25 percent.

The Aussie was worth 95.68 cents US and it took ¥102.5684 to buy an Australian dollar, while the kiwi traded at 75.67 cents US and at ¥102.5684.